SRI versus ESG investing: the performance of MSCI ACWI sustainable impact index

In the last decade, an idea of sustainability has developed that has led to the adoption of environmental, social, and governance (ESG) metrics as a guide for fnancial decisions. Within this framework, sustainable and responsible investing (SRI) is the most rigorous approach to sustainability to achieve economic and fnancial goals, including ESG assessments. In the article, the interaction between SRI and ESG metrics will be analyzed: specifcally, the performance in terms of returns and volatility of the MSCI ACWI Sustainable Impact index (which includes listed companies whose predominant business meets at least one of the environmental and social goals defned by the SDGs) with that of companies listed in the main MSCI ACWI index (which includes a large sample of ESG-rated companies). We fnd that the MSCI ACWI Sustainable Impact index performs better than the MSCI ACWI index, mainly due to a selection bias induced by the EU Sustainable Finance Regulation (SFDR).